Existing-home sales break record

July 25, 2005

Activity flattens in Midwest but rises in other regions

Inman News

Total existing-home sales – including single-family, town homes, condominiums and co-ops – set a new record in June, increasing 2.7 percent since May, the National Association of Realtors reported today.

If sales continued at this June pace for a full year, accounting for seasonal fluctuations in sales, it would represent 7.33 million home sales, the association reported, up from a seasonally adjusted pace of 7.14 million home sales in May.

The June rate of sales was 4.4 percent above the 7.02 million rate in June 2004, and the previous record was 7.18 million in April 2005, the association reported.

David Lereah, NAR's chief economist, said home sales were expected to ease slightly from peaks reached over the last couple of months. "Just when you think sales activity is ready to settle into a more sustainable pace, the housing market continues to surprise," he said. "We've been expecting sales to remain at historically high levels, but this performance underscores the value of housing as an investment and the importance of home ownership in fulfilling the American dream."

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.58 percent in June, down from 5.72 percent in May. The rate was 6.29 percent in June 2004. "Job growth and economic improvement also are boosting home sales," Lereah said.

The national median existing-home price for all housing types was $219,000 in June, up 14.7 percent from June 2004 when the median price was $191,000 – and represents the strongest increase since November 1980 when annual appreciation was 15.6 percent. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Al Mansell, of Salt Lake City, said home sales are expected to ease as the year progresses. "When the housing market eventually slows from red-hot levels, we should see some cooling in price gains," he said. "Home prices continue to be bid-up in tight markets across the country. Eventually, appreciation rates will slow and come down to normal levels when the shortage of homes on the market improves and comes closer into balance, hopefully, by the second half of next year."

Historically, home prices rise at the general rate of inflation, plus one to two percentage points.

Total housing inventory levels rose 3.8 percent at the end of June to 2.65 million existing homes available for sale, which represents a 4.3-month supply at the current sales pace. "The irony is that housing inventory is tight enough to boost prices but not enough to curb overall sales," Mansell said.

Existing condominium and cooperative housing sales hit a fourth consecutive monthly record in June, rising 4.5 percent to a seasonally adjusted annual rate of 960,000 units from a pace of 919,000 in May. Last month's sales activity was 12.4 percent above the 854,000-unit level in June 2004. The median condo price was $223,500, up 14.8 percent from a year earlier. Condo/co-op sales accounted for a 13.1 percent market share.

Single-family home sales increased 2.4 percent to a record seasonally adjusted annual rate of 6.37 million in June from 6.22 million in May, and were 3.2 percent above the 6.17 million-unit pace in June 2004. The median single-family home price was $218,600 in June, up 14.5 percent from a year ago.

Regionally, total existing-home sales in the West increased 5.5 percent to a record annual pace of 1.73 million units in June, and were 3.6 percent above June 2004. The median existing-home price in the West was $317,000, up 17.4 percent from a year ago.

Existing-home sales in the Northeast rose 3.4 percent to a record annual level of 1.23 million in June, and were 7.9 percent above the same month a year ago. The median existing-home price in the Northeast was $250,000, up 13.6 percent from June 2004.

Total existing-home sales in the Midwest showed a 1.9 percent gain to an annual sales rate of 1.63 million in June, the second highest on record, and were unchanged from June 2004; the record was 1.64 million in April of this year. The median price in the Midwest was $177,000, up 12.7 percent from a year earlier.

The home resale pace in the South was up by 1.1 percent to a record level of 2.74 million units in June, and was 5.8 percent higher than a year ago. The median price of an existing home in the South was $193,000, which was 9 percent higher than June 2004.

Average existing-home prices were up 9.4 percent in the U.S. from June 2004 to June 2005, up 11.3 percent in the West, 10 percent in the Northeast, 7.9 percent in the South and 7.8 percent in the Midwest.

Existing-home sales, which include single-family, town homes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau's series on new single-family home sales, which are based on contracts or the acceptance of a deposit, the association noted.

Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family, the association reported.